Ghost Kitchens: Location + Specialization Are The Keys to the Future of Food Delivery

Since releasing our 2019 Fifth Wall Retail Trends & Predictions, the one we’ve been most inundated with questions about from partners, LPs and media is Ghost Kitchens — both in terms of what they are, and how they tie into Fifth Wall’s overall vision of helping connecting the world’s largest owners and operators of real estate with entrepreneurs and innovators who are using technology to make a significant impact on the built world. We were excited to be included in The Wall Street Journal’s first major piece on the topic this week, “Food Delivery Startups Cook Up New Model That’s All About the Kitchen” by the very prescient Marc Vartabedian — and wanted to expand on our thoughts around what we view as a massive opportunity.

Food is one of the largest categories of consumer spend in America. People like good food, and they don’t mind spending their disposable income on said good food. Yet while food is a massive category of spend, it’s practically in the stone ages when it comes to e-commerce. The perishable nature of food and lack of readily available delivery personnel prior to the rise of the gig economy drove this lag. However, in the early 2010s, after early services like Grubhub and Seamless (now merged) had established market demand for ordering food online, Postmates, Caviar and Uber Eats burst onto the scene to provide delivery-as-a-service. These new players quickly established how enormous the opportunity could be: In the United States alone, the online food delivery market is forecast to hit $30 billion in 2022.

For existing restaurants, partnering with large on-demand fleets seems a much more efficient value proposition than each restaurant keeping a delivery team employed. And the ones that go even further with delivery of people (i.e., Uber) have an opportunity to drive higher utilization of their drivers and greater economies of scale. Their specialization — the delivery of goods and people — is a key to their success.

The addition of e-commerce elements to the restaurant economy added both an opportunity and a challenge — the most popular restaurant brands (like Sugarfish, our go-to Postmates order here at the Fifth Wall offices in LA!) could no longer keep up with the pace of delivery orders with their existing kitchen facilities and locations. (To put in perspective, on average adding e-commerce delivery capability increases revenue 20% for restaurants when offered, and in one example known as the “GrubHub Effect, small restaurants typically see revenues increase 50% after signing up on the platform.)

Enter ghost kitchens, a simple fix that will help better facilitate the fast delivery of good foods. Ghost kitchens are essentially restaurants without a front-of-house staff. Think head chef, line cooks, prep cooks — everything but the servers, bartenders, and sommeliers.

There have always been commercial commissary kitchens for caterers, food truck operators, and local makers, but those were typically built in light industrial areas, often far away from where people live. Ghost kitchens take that basic concept and re-orient it as a real estate problem: Because quicker delivery times drive demand, the ghost kitchens that will succeed to be as close as feasibly possible to their customers. In other words: location, location, location. We believe Fifth Wall and our strategic LP’s, who control over 3 billion square feet of US Commercial real estate in the most desirable high-density locations, are uniquely equipped to grab the jump ball. Across real estate verticals beyond the obvious light industrial — we believe that the unused or remnant space in office buildings, shopping centers, multi-family buildings, where office workers, customers and tenants spend their days actually present a huge opportunity.

Like the restaurateurs and delivery apps that helped propel them into existence, ghost kitchen operators are succeeding because they are specializing. They’re doing one thing and doing it exceptionally well: finding the real estate near high delivery areas and building out multi-brand ghost kitchens. It gives restaurateurs an opportunity to capture new demand that they couldn’t serve efficiently on their own. And restaurateurs can capture that demand — and grow their business — without having to make huge capital investments in a new space. It’s a turnkey operation — kitchen-as-a-service.

It’s all about best-in-class companies facilitating each other’s growth along a dynamic value chain: do what you do and do it well. Uber Eats and Grubhub can deliver food. Ghost kitchen operators can build and maintain best-in-class kitchens. This allows chefs to focus on their specialization — developing and cooking delicious meals — while simultaneously expanding their footprint and growing their businesses. (And if you have an incredible business that falls within the above, or a different perspective — Fifth Wall and our Anchor LP’s would love to get to know you better.)


INSIGHTS is the official blog of Fifth Wall Ventures…


INSIGHTS is the official blog of Fifth Wall Ventures, exploring the Built World’s biggest ideas, emerging trends and the most audacious concepts transforming the ways we live, work, sleep, consume, move, create, connect and play.

Fifth Wall Ventures

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Fifth Wall is the largest venture capital firm focused on technologies for the global real estate industry.


INSIGHTS is the official blog of Fifth Wall Ventures, exploring the Built World’s biggest ideas, emerging trends and the most audacious concepts transforming the ways we live, work, sleep, consume, move, create, connect and play.